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‘It’s possible there’s been some Olympics-related disruption in early summer but it still looks incredibly weak,’ he said.

‘This is an ominous sign. I don’t think people would have expected much Olympics bounce from the manufacturing sector.’

Research group Markit said its barometer of activity in UK factories - where anything below 50 represents contraction - fell from 48.4 in June to 45.4 in July.

Closed shop: The government will need to return from recess with plans to get growth back on track, economists warn

That was the weakest reading since May 2009 and marked a dismal start to the third quarter of the year for British manufacturers.

The economy crashed 0.7 per cent in the second quarter - the biggest drop in gross domestic product since the height of the financial crisis three years ago.

It was the third quarter in a row that the economy has contracted - leaving Britain trapped in the longest double-dip recession since quarterly records began in 1955.

Analysts warned that the weak start for the manufacturing sector in the third quarter cast doubt on the likelihood of a bounce-back this summer.

Howard Archer, chief UK and European economist at IHS Global Insight, said the factory figures were ‘absolutely dreadful’.

He said: ‘The survey is massively disappointing and worrying, indicating that the manufacturing sector’s problems are currently running deep.’ Markit blamed weak demand at home and abroad, including in the eurozone and Asia as the crisis in the single currency bloc took its toll on the global economy.

Economists say the shocking performance of British factories last month is in part due to the Games

Rob Dobson, senior economist at Markit, said: ‘The UK manufacturing sector hit turbulent waters in July. The domestic market shows no real signs of renewed life, while hopes of exports charting the course to calmer currents were hit by our main trading partner, the eurozone, still being embroiled in its long-running political and debt crises.’

David Noble, chief executive of the Chartered Institute of Purchasing and Supply, the international trade body that helps Markit compile the figures, added: ‘A perfect storm of wet weather and weak confidence in the UK has combined with global economic drift to engulf the manufacturing sector in July.

While the eurozone has continued to be the major factor, declines in business from Asia have dashed hopes of a quicker recovery.’ Lee Hopley, chief economist at manufacturing lobby group EEF, said the July slump ‘raises question marks over whether we will see a bounce back in the near future’.

She added: ‘There isn’t much positive news to take from this survey, with demand being hammered by persistent weakening in eurozone markets and slower growth in other parts of the world. Government will need to return from recess with a lot more clarity around its plans to get growth back on track.’

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Eurozone crisis: Economy rocked by 'absolutely dreadful' slump in output from British factories due to Olympics